SINGAPORE - Sembcorp Industries on Monday (July 2) said it has invested in an estimated 77 per cent stake in an Australian clean energy firm for A$5 million (S$5 million), as it moves to expand into the Australian renewable energy market.

The deal with Australia's Vellocet Clean Energy (VCE) was signed with Sembcorp's wholly owned subsidiary, Sembcorp Energy Australia. VCE has capabilities in dealing with systems tied to solar microgrids and new forms of energy storage and distribution. A microgrid refers to a small grid that runs independently or alongside a main power grid. Depending on their designs, microgrids can be used to power pockets of off-grid populations, serve as back-up generators, and store excess energy.

VCE targets the market for corporate power purchase agreements, which Sembcorp deems a newer segment of the market that presents scope for growth. Such agreements are contracts through which a business agrees to buy electricity directly from an energy generator. This contrasts with the more common approach of purchasing power from licensed electricity suppliers. A DLA Piper report noted that such long-term agreements offer financial certainty for the developers, thereby helping to bring about more renewable energy on the grid.

VCE is in active talks with potential customers, and has memorandums of understanding for a number of solar power projects, Sembcorp said.

"In Australia, the retirement of older coal-fired facilities is creating a significant opportunity for the growth of cleaner energy solutions. At the same time, high retail power tariffs and network and transmission costs have resulted in a favourable outlook for corporate power purchase agreements and distributed energy. Against this background, it is an opportune time for Sembcorp to move into the market," said Neil McGregor, group president and CEO of Sembcorp.

"VCE will give us a good foothold to grow in Australia, in line with our strategy to rebalance our portfolio and complement our Singapore and Asian bases with other investments in developed markets, expand our low-carbon energy business and strengthen our portfolio of solutions that are closer to the customer."